Congress votes to stop filling oil reserve

Move might lower prices for a while at the gas pump

Zachary Coile, Chronicle Washington Bureau

Published 4:00 am, Wednesday, May 14, 2008

Photo: WILL KINCAID

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** ADVANCE FOR SUNDAY, MARCH 19 **FILE**Sen. Byron Dorgan, D-N.D., shown addressing members of the North Dakota House of Representatives in Bismarck, N.D., Jan. 31, 2005, has pressed for closer scrutiny of fines levied on businesses by federal agencies. (AP Photo/Will Kincaid) less

** ADVANCE FOR SUNDAY, MARCH 19 **FILE**Sen. Byron Dorgan, D-N.D., shown addressing members of the North Dakota House of Representatives in Bismarck, N.D., Jan. 31, 2005, has pressed for closer scrutiny of ... more

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Congress votes to stop filling oil reserve

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The House and Senate voted overwhelmingly Tuesday to temporarily stop filling the Strategic Petroleum Reserve, a response to public anger over rising oil prices as the average price of regular unleaded gasoline nationwide hit a new high of $3.73 per gallon.

The move was a challenge to President Bush, who had threatened to veto the measure, saying it would do little to lower prices. But the lopsided votes - 97-1 in the Senate and 385-25 in the House - may have changed his mind. White House aides said Tuesday Bush would not veto the legislation, although he still believes it will have a negligible impact.

Lawmakers acknowledged the measure may shave just pennies off the price of a gallon of gas, but said it is wrong to keep filling the emergency stockpile - which is 97 percent full - while crude oil is reaching record highs.

"We are buying the most expensive crude oil in the history of the world and storing it," said Sen. Byron Dorgan, D-N.D., chief sponsor of the measure. "When American consumers are burning at the stake by high energy prices, the government ought not be carrying the wood."

The votes showed how politically explosive the issue of gas prices could be this November. Both Democratic presidential candidates, Sen. Barack Obama of Illinois and Sen. Hillary Rodham Clinton of New York, took a detour from the campaign trail to vote for the measure. The presumptive Republican presidential nominee, Sen. John McCain of Arizona, was campaigning in the Pacific Northwest Tuesday, but supports the measure.

Republicans shift stance

Many Republicans opposed past efforts to stop filling the reserve, but shifted their position in response to the rapidly rising price of oil.

"I have changed my mind on that because the increases in the price at the pump have gotten so dramatic and so outrageous," said Sen. David Vitter, a Louisiana Republican.

The defiance by Republicans of Bush's veto threat signaled that lawmakers are fearful of voting against anything that could be seen as lowering gas prices. Sen. Wayne Allard, R-Colo., who is retiring at the end of the year, was the only senator to vote no, saying that halting shipments to reserve without increasing supply by opening new areas to oil drilling would be "a disservice to the American people."

The legislation would halt shipments for the rest of the year of roughly 70,000 barrels a day into the reserve, a system of four underground salt domes on the Gulf Coast run by the Energy Department. The reserve currently holds about 702 million barrels of oil, an amount equal to two months of U.S. imports. The government pays the market price for the light crude oil it stores in the reserve.

Created in 1975

Congress created the reserve two years after the 1973 Arab oil embargo as a way to prevent supply disruptions. Bush released oil from the reserve in 2005 after refineries were shut by Hurricane Katrina. Bush's father, President George H.W. Bush, ordered the first drawdown from the reserve in 1991 in the buildup to the Gulf War.

President Bill Clinton tapped the reserve several times to help consumers cope with rising energy prices, including releasing 30 million barrels of crude oil in September 2000, which Republicans criticized as an effort to help Vice President Al Gore's presidential campaign six weeks before the election.

Bush's decision not to veto the measure may have been a step to avoid giving Democrats the publicity coup of holding another vote to override his veto. His trip this week to Saudi Arabia to meet with Saudi King Abdullah, leader of the world's largest oil producer, would have given Democrats even more ammunition.

But on Tuesday his aides were still criticizing the legislation. White House spokeswoman Dana Perino repeated Bush's view and said the reserve should only be tapped in emergencies. She said the 70,000 barrels of oil - the equivalent of one-tenth of one percent of the world's oil demand - would not help consumers.

"We don't believe that it would have a big enough impact on prices for anybody to really notice," Perino said.

Verleger has argued that even a small shift in demand by halting U.S. government purchases of light, sweet crude - a sought-after and easy-to-refine oil, which is used as a benchmark on the New York Mercantile Exchange - could trigger a significant drop in the price of oil.

More skeptical view

Other energy analysts are more skeptical. Kevin Book, senior energy analyst for Friedman, Billings, Ramsey & Co., noted that in the hour after the Senate passed the measure nearly unanimously the price of crude oil jumped by a dollar. (The price of crude oil closed at $127 per barrel, a new record, after reports that Iran is considering cutting its production.)

Book said, "70,000 barrels is a rounding error. It is not material in an 85.7 million barrel per day market."

Book added that it will take much more significant action - such as increasing the supply of oil by opening up new areas in the eastern Gulf of Mexico to drilling - for the markets to take notice. Soaring energy prices are starting to convince more Americans to buy hybrid cars and fuel-efficient appliances, which could reduce demand and lower oil prices, he said.

The Senate, by a 56-42 vote, defeated a Republican measure Tuesday that would have opened Alaska's Arctic National Wildlife Refuge to drilling and allowed states to drill off their shores. Democrats criticized the measure, saying the country can't drill its way to energy independence and should focus instead on conservation and renewable energy.